General Motors Co. on Wednesday abandoned a months-long effort to win European government aid for restructuring its Opel and Vauxhall operations, saying that it needed to move ahead and would fund the overhaul itself.
A week after Germany rejected its request, GM said it was withdrawing applications for loan guarantees totaling €1.8 billion ($2.2 billion) from several European countries. The automaker said its own improved finances were a factor in the decision.
That will leave GM, which is majority-owned by the U.S. government, to shoulder the total funding needs of €3.3 billion rather than the €1.9 billion it had previously committed.
GM's move ends lengthy maneuvering over the future of Opel and Vauxhall, and represents a sharp turnaround from last year, when GM nearly sold a majority stake in its European operations and went through bankruptcy reorganization in the U.S. It subsequently decided to hold onto its European business while seek government support.
"In that period of time the GM financial position has improved somewhat and the outlook is positive," he said — helping make Wednesday's decision possible.
Britain's government committed loan guarantees to the tune of €330 million and Spain had indicated that it would commit a similar amount. Reilly said there had been "no withdrawal of support" by either country, but GM made its decision after considering the fallout from Berlin's rejection.
The four German states where Opel has plants were willing to negotiate contributions. But continuing down that road would have meant "some pretty long bureaucratic processes and ... we just can't afford that any longer; we need to put this behind us and get going," Reilly said in a conference call with reporters.
GM's move ends lengthy maneuvering over European aid for Opel and British sister brand Vauxhall.
Return to profitability
Last November, GM abruptly canceled the planned sale of a majority in the units to a consortium led by Canadian auto parts maker Magna International Inc., instead deciding to restructure the brands itself.
That decision irked Germany, which had pushed hard for the sale and had been prepared to offer financial support for it.
GM then sought aid from European governments as it presented a restructuring plan that foresees some 8,300 job cuts across the continent. Reilly said "there is no intention to change the restructuring plan."
The two brands employ around 48,000 people in Europe, roughly half of them in Germany.
In May, GM reported an $865 million first-quarter profit, its first positive quarter in three years. The profit came as global auto sales started to recover and despite a $506 million loss in Europe, the only place GM lost money.
German Economy Minister Rainer Bruederle, who cited GM's improved finances in rejecting its aid application, welcomed its decision to give up seeking assistance.
"I feel vindicated in my assessment that General Motors has the funds for an Opel restructuring," Bruederle said. He welcomed the fact that GM "seems ready to take its full responsibility as an owner toward its 100 percent subsidiary Opel."
In Detroit, GM spokesman Tom Wilkinson said the decision not to seek European aid means U.S. and Canadian government dollars will be used to help restructure Opel.
But he said the governments have known that GM could spend the money elsewhere ever since the new General Motors Co. was formed after GM emerged from U.S. bankruptcy protection last July.
"Treasury understands that's how you have to operate the business," Wilkinson said. "We have to run the business prudently and we have to make sure we're maximizing the return for our investors. That requires running the company globally."
GM has received about $50 billion in aid from the U.S. Treasury and $9.5 billion from the Canadian federal and Ontario provincial governments. It has repaid $6.7 billion to the U.S. and $1.4 billion to the Canadian governments, with the rest converted to equity in the automaker.
The U.S. government owns about 61 percent of GM, while the Canadian governments own roughly 12 percent. GM hopes to repay all government aid with a public stock offering, perhaps later this year.
"Of course the U.S. Treasury was informed" about the decision on Opel, Reilly said.
"One very important part of GM is its European operations — and if the European operations are successful, it makes GM much more successful and more solid as a global manufacturer, and therefore enhances the longterm viability of GM," he argued.
Opel and Vauxhall will now be able to concentrate fully on implementing its plans, in particular a €11 billion project to invest in future projects that was announced in February, GM said.
"With these new products and the impact of restructuring, we expect to return to profitability shortly," Reilly said.
Last month, GM and Opel worker representatives reached a deal under which employees would contribute savings of more than €1 billion through 2014 to help the restructuring drives. GM noted that the agreement was not tied to government guarantees.
AP Auto Writer Tom Krisher contributed to this report from Detroit.